So much for Christmas cheer: Norway’s consumer price index (CPI) jumped by 5.1 percent from November last year to November 2021, according to new figures from state statistics bureau SSB (Statistics Norway). That yields the highest inflation rate in Norway since October 2008, blamed mostly on record-high electricity rates.
“We have to go 13 years back in time to find a similar 12-month rise in the CPI,” said Trym Kristian Økland of SSB in a press release from the statistics agency Friday morning. “Not surprisingly, it’s the still-high electricity rates that clearly contribute the most to the increase.”
SSB noted how the total price of electric power and its distribution to customers last month rose by 123.5 percent compared to the same month last year. That in turn has been blamed on less precipitation than normal in Southern Norway last summer and early fall, resulting in low levels of water in reservoirs used to generate the country’s usually plentiful hydro-electric power.
Norwegian electricity prices are also influenced to a much higher degree than earlier by price levels elsewhere in Europe, given deregulation of markets and international cables that send power back and forth among countries connected.
Other non-energy related price growth amounted to just 1.8 percent, according to SSB. “That means that electricity rates and nettleie (electricity distribution prices) alone contributed to pulling up the CPI by 3.3 percentage points during the (12-month) period,” Økland said, adding that SSB has never measured such a difference between the overall CPI and the CPI minus energy costs before.
Consumer prices for fuel also rose, as did prices on restaurant menus and rates charged by hotels after both sectors reopened for more business as usual after a long period of Corona containment measures, according to SSB’s numbers. Many consumers in Norway have also seen rises in other services, from hair cuts to dental care, as providers passed on Corona-related costs and now seem to have made them permanent.
SSB’s researchers, however, noted that prices for food and alcohol-free drinks actually fell by 3.6 percent during the same November 2020 to November 2021 period, but mostly because higher taxes on chocolate and food items containing sugar were removed by the former Conservatives-led government last year. Norway’s farmers are now demanding higher prices for their products, not least because of their own high electricity bills and the costs of keeping barns and greenhouses warm enough through the winter.
There were slight increases (less than one percentage point) from October to November in prices for clothing and shoes, health care, transport, cultural and recreational activities. Again it was the jump in prices for electricity and at hotels and restaurants that was highest.
The new inflation statistics come just a week before Norway’s central bank (Norges Bank) is due to decide whether to go ahead with another rise (probably a quarter-point) in interest rates. They were brought down to zero when the Corona crisis began in the spring of last year. When Norway’s economy started recovering and Corona restrictions were lifted, the central bank decided that a gradual series of rate hikes was in order.
Some Norwegian economists think the recent reinstatement of stricter Corona rules, aimed at halting a sharp increase in infection rates, will prompt the central bank’s board to delay another interest rate increase. With many Norwegian households also now getting huge monthly electricity bills that have more than doubled, the bank may not want to effectively boost mortgage payments as well.